Johnson & Johnson Wins One Round in Stent Battle

By BARNABY J. FEDER

Published: June 22, 2005

A Delaware jury said yesterday that Boston Scientific's major stent models had infringed patents owned by Johnson & Johnson, its archrival in the multibillion-dollar market for the lifesaving devices.

Stents are metal cylinders inserted into blood vessels to keep them from closing after blockages have been cleared in a procedure called angioplasty.

The verdict covers two bare-metal stents called the Express and the Libert?as well as the best-selling product in the sector, a drug-coated version of the Express called Taxus. The drug coating counteracts the common tendency of blood vessel tissues to grow around or through a bare-metal stent, thus creating a new blockage.

Judge Sue L. Robinson of United States District Court had previously dismissed Johnson & Johnson's claim that the drug-coated version of Libert?lso infringed on its patents. That product could not be considered, she said, because it has not yet been approved for sale in the United States.

Boston Scientific said that it would try to overturn yesterday's verdict through posttrial motions and appeals. Meanwhile, the two companies head back into court today for a second trial on whether Johnson & Johnson's drug-coated stent, called Cypher, infringes on Boston Scientific's patents covering such coatings.

Analysts have estimated that yesterday's verdict could cost Boston Scientific, based in Natick, Mass., as much as $1 billion in royalties. A decision on the amount has been reserved for a second trial on damages, scheduled for August. If the second jury decides Boston willfully infringed, the damage award could be tripled.

''That's the only scary possibility,'' said Dr. Mark Landy, who follows the industry for the Susquehanna International Group of Companies in Bala Cynwyd, Pa.

The view of Dr. Landy and others that Boston Scientific can relatively easily absorb a $1 billion judgment is an indicator of just how profitable the Taxus has been. It grabbed the market lead from the Cypher by Johnson & Johnson within weeks of its introduction in the United States 15 months ago because many doctors felt it was easier to insert in the tiny arteries that supply blood to the heart. The company's sales grew 62 percent last year to $5.62 billion.

Yesterday's verdict is unlikely to force the Taxus from the market because the main patent that Boston Scientific infringed, the basic stent design invented by Dr. Julio C. Palmaz, is due to expire later this year.

The jury also concluded that Boston Scientific infringed on Johnson & Johnson's design for expanding a stent into the vessel wall once it has been delivered to the blockage site through a catheter. That patent runs through 2015. It is unclear what impact that decision might have on the Libert?a more flexible stent delivery system than the Express.

Boston Scientific is counting on the Libert?o keep it ahead of competitors as companies like Medtronic and Abbott Laboratories enter the domestic market in the next few years. Johnson & Johnson could try to block Boston Scientific from bringing Libert?o market if yesterday's decision holds up on appeal, but such a strategy could antagonize many doctors, so both companies would face pressure to work out a royalty agreement.

The lawsuits in Delaware are taking place against a backdrop of other litigation between the companies. Boston Scientific recently won a patent infringement case in the Netherlands that could force Johnson & Johnson to abandon drug-coated stent production there. Johnson & Johnson is appealing that decision.

Many investors expect the legal cross-fire to go on for years and eventually end in a comprehensive settlement. Boston Scientific's shares rose 8 cents yesterday, to $28.70. Johnson & Johnson's shares fell 2 cents, to close at $66.53. Trading volume was only modestly higher than average in recent months.